Bharti Airtel’s board on Sunday approved raising up to ₹21,000 crore by way of rights offering at ₹535 per share
Shares of telecom provider Bharti Airtel Ltd rose nearly 2% on Monday on the National stock market reacting to the company’s announcement of a rights offering . Airtel’s board on Sunday approved raising up to ₹21,000 crore by way of rights offering at ₹535 per share.
Although the timelines aren’t mentioned, around 25% are going to be paid upfront and therefore the rest are going to be called as per requirement over subsequent 36 months. It should be noted that this is often the third fundraising round within the last three years after it raised a cumulatively ₹42000 crore in FY20 rights offering , qualified institutional placements and foreign currency convertible bonds.
Analysts say at ₹535 per share, which is 1:14 ratio, implies a 7% equity dilution and may be a mere 10% discount to its current market value , with alimited incentive for existing holders to subscribe if the stock falls.
What could also bother investors is that the cause for this fundraising, which has not been disclosed.
According to analysts at Motilal Oswal Financial Services Ltd, the last few fundraises were administered within the backdrop of intense competition within the market and at a period of high leverage. However, this capital raise is surprising because the management in its previous couple of calls stated that its leverage and liquidity position is comfortable and self-sustainable, with healthy free income generation altogether verticals, thus indicating no additional capital requirement, they said during a report.
“Historically, the management has given a really clear capex outlook, with a yearly guidance. The unexpected capital raise may cause a negative reaction within the short term, but we see an honest earnings growth opportunity over subsequent 12 months,” added the Motilal Oswal report.
With Vodafone Idea struggling to survive, Bharti Airtel could still gain more subscribers resulting in higher market share. Some analysts say, the corporate may use these funds for upcoming opportunities because the sector seems to be fast heading towards duopoly.
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